Apple dishes out its latest iPhone

Apple rolls out its next generation iPhone today, adding speed and options to a product that took the market for smart phones by storm just one year ago.

On sale at Apple Stores nationwide beginning at 8 a.m., the new iPhone 3G could be in the hands of 10 million people by the end of the year, ushering in the next generation of on-the-go computing.

Paul Sakuma/APAn older Apple iPhone is shown next to an advertisement for the iPhone 3G at an AT&T store.

"It's fairly clear that in its first year the iPhone changed not just the smart phone market, but the cell phone market. It created a completely different user experience," said Andy Hargreaves, consumer electronics analyst with Pacific Crest Securities based in Port land. "The 3G will likely just build on that."

The two big advances: faster web surfing using AT&T's 3G, or third generation wireless network, and an open architecture that will allow software developers to create applications for the iPhone for the first time.

Apple says more than 500 added applications, one-fourth of them free, will be available today for wireless downloading into the iPhone 3G through Apple's new online App Store.

"It looks like once again Apple has really captured the hearts and minds of consumers, and capturing mind share is the first step toward capturing market share," said Michael Gartenberg, vice president and research director of Jupiter Research in New York.

While the faster internet is great, Gartenberg said, the 3G technology has been available from some of Apple's competitors since at least 2003. "The real story is the software," he said.

"You now have thousands of developers around the world working on new applications," he said, pointing to software for social networking, mapping, streaming video and, of course, "games, games, games."

The latest phone will cost you less and more at the same time: the hardware costs either $199 or $299, depending on how much memory you want, compared to $499 when the original hit the market in June 2007.

But the service contract from AT&T will cost between $69.99 and $129.99 per month, compared to $59.99 for the cheapest service package offered for the first iPhone.

The iPhone comes to market with the backing of some the web's biggest players, like Facebook founder Mark Zuckerberg, MySpace founder Chris DeWolfe and representatives of online auction house eBay, travel store Travelocity and gaming giant Sega.

According to the market research firm IDC, Apple sold more than 5 million iPhones through the first quarter of 2008, during which it had a 19.2 percent share in the U.S. smart phone market, well behind Blackberry maker Research In Motion which had 44.5 percent.

While the iPhone 3G has generated great anticipation among consumers and industry watchers, its release is not likely to match the near-hysteria that accompanied the launch of the first iPhone last year.

"I think it probably won't be same frenzy as last year. The line at Apple Stores might only go around the block once instead of twice," Gartenberg said.